Barber v. Sedgwick Claims Management Services, Inc.

Filing 258

MEMORANDUM OPINION AND ORDER denying 241 MOTION by Sedgwick Claims Management Services, Inc. for Judgment on the Pleadings. Signed by Judge Robert C. Chambers on 10/24/2016. (cc: attys; any unrepresented parties) (mkw)

IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION

JILL C. BARBER,
Plaintiff,
v.

CIVIL ACTION NO. 3:14-27349

SEDGWICK CLAIMS MANAGEMENT SERVICES INC.,
and MEDICAL EVALUATION SPECIALISTS, INC.,
a Michigan Corporation, dba MES SOLUTIONS,
Defendants.

MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendant Sedgwick Claims Management Services, Inc.’s
Motion for Judgment on the Pleadings. ECF No. 241. For the following reasons, the Court
DENIES Defendant’s motion.
Factual and Procedural Background1

I.

Plaintiff alleges in the Second Amended Complaint that she was bitten by a brown recluse
spider while working at the Family Dollar Store in West Hamlin, Lincoln County, West Virginia
on September 24, 2012. Pl.’s Second Am. Compl., ECF No. 230, at ¶ 16. On September 28,
2012, she filed a worker’s compensation claim as a result of the injuries sustained from the bite.
Id. at ¶ 17. Defendant Sedgwick Claims Management Services, Inc. (Defendant), as a third-party
claims administrator for self-insured Family Dollar, authorized periodic payments for indemnity

1

The Court has explained the factual and procedural background in its Order denying
Defendant’s Motion to Dismiss (ECF No. 191), but because Plaintiff filed a Second Amended
Complaint, the Court briefly summarizes the additional allegations contained therein. See Pl.’s
Second Am. Compl., ECF No. 230.

for wage loss and medical benefits for the injury.

Id. at ¶ 18.

Plaintiff suffered severe

complications from the spider bite wound and subsequently filed the original Complaint in this
action on October 29, 2014.2 ECF No. 1. The lawsuit is based on allegations of common law
fraud for the conduct of Defendant and Defendant MES Solutions,3 which led to Plaintiff’s initial
denial of worker’s compensation benefits.
In its Motion for Judgment on the Pleadings, Defendant argues that Plaintiff’s first and
second counts allege bad faith claims rather than claims of common law fraud allowed under
Persinger v. Peabody Coal Company, 474 S.E.2d 887 (W. Va. 1996). In Count I, Plaintiff alleges
a “First Act of Fraudulent Conduct” involving the denial of hyperbaric oxygen therapy due to false
medical records that described Plaintiff as a male who smoked, drank alcohol, and used illicit
drugs. The first count largely mirrors Count I from the original Complaint, explained fully in this
Court’s Order denying Defendant’s Motion to Dismiss. See Pl.’s Compl., ECF No. 1, at ¶¶ 1936; Mem. Opinion & Order, ECF 191, at 2-3. As Defendant argues that “Plaintiff has included a
significant number of additional allegations in the Second Amended Complaint which were not
contained in the original Complaint” to justify its second dispositive motion, 4 the Court has
thoroughly examined the differences between the two complaints and will review only the
additional allegations here.

2

The Second Amended Complaint was filed on May 23, 2016. ECF No. 230. The
Second Amended Complaint corrected the name of Defendant MES Solutions in the Amended
Complaint to its full name of Medical Evaluation Specialists, Inc. (Defendant MES Solutions).
See id. at n.1.
3
Defendant MES Solutions is alleged to be a third-party administrator that transmitted
information and coordinated peer review for Defendant. Pl.’s Second Am. Compl., ECF No. 230,
at ¶ 12.
4
Defendant’s first dispositive motion to the Court was for a motion to dismiss, but the
Court converted it to a motion for judgment on the pleadings because Defendant untimely filed
the 12(b)(6) motion. See Mem. Opinion & Order, ECF No. 191, at 5.
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The Second Amended Complaint provides more detailed allegations as to which of
Defendant’s employees engaged in which activities. Plaintiff alleges that Michelle Triggs served
as Defendant’s claims administrator who denied the requested hyperbaric oxygen therapy on May
29, 2013. Pl.’s Second Am. Compl., ECF No. 230, at ¶ 25. The allegations regarding Dr. Glenn
Hamilton’s involvement further described his lack of medical licensing with the West Virginia
Board of Medicine and his role with Defendant MES Solutions as a peer reviewer for Defendant.
Id. at ¶ 26. Lou Ann Mariaini is named as Defendant’s employee who allegedly reviewed
Plaintiff’s medical records, concluding that Plaintiff’s alcohol, tobacco, and illicit drug use were
documented. Id. at ¶ 27. Plaintiff alleges that Defendant MES Solutions performed a quality
assurance review of the medical records received from Defendant but failed to detect the
inaccuracies between the provided records and Plaintiff’s medical history. Id. at ¶¶ 30-32 (also
alleging alterations made to Dr. Hamilton’s report). After receiving the claim denials dated May
22 and May 29 of 2013, Plaintiff allegedly contacted Lisa O’Neal, a third-party case worker used
by Defendant, to inform her of the error. Id. at ¶ 36. O’Neal in turn contacted Triggs, who
allegedly did not review the issue. Id. at ¶¶ 37-38. Plaintiff alleges that Attorney James Heslep,
counsel to Defendant, advised Iryna Slotylo, Defendant’s claims administrator, that he could not
corroborate the findings that Plaintiff smoked, drank alcohol, or used illicit drugs, but Defendant
allegedly ignored this advice. Id. at ¶ 40.
Small changes regarding who sent or reviewed certain documents were also made in the
Second Amended Complaint, but these changes did not affect the overall claim for fraudulent
conduct. See id. at ¶¶ 28 (records provided by MES Solutions rather than Slotylo); 29 (naming
Triggs and Mariani as those who knew or should have known Plaintiff’s medical records rather
than Slotylo); ¶ 41 (Slotylo’s supervisor, Tom Constance, added). Plaintiff also alleges that

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actions taken by Defendant MES Solutions or Defendant’s employees amounted to a civil
conspiracy to deny Plaintiff’s treatment. See id. at ¶¶ 34-35.
In Count II, Plaintiff alleges a “Second Act of Fraudulent Conduct” focusing on the
possible diagnosis of Pyoderma Gangrenosum (PG). As the second count again mirrors Count II
in the original Complaint, the Court only highlights the differences or additional allegations here.
See Pl.’s Compl., ECF No. 1, at ¶¶ 37-54; Mem. Opinion & Order, ECF 191, at 3-4. Plaintiff
alleges that Slotylo requested an additional assessment by Dr. ChuanFang Jin, who provided an
independent examination of Plaintiff, in February of 2014 to review medical records from St.
Mary’s Medical Center. Id. at ¶ 57. Dr. Jin responded that she did not have enough information
to determine whether Plaintiff had PG. Id. Heslep allegedly spoke with Dr. Jin afterwards to
inform her of the pathology report from November of 2013. Id. at ¶ 58. Plaintiff alleges that
Slotylo requested another additional assessment in late February of 2014 to get a definitive
diagnosis of PG, and Dr. Jin determined that Plaintiff had PG, which was unrelated to the spider
bite. Id. at ¶ 59. Plaintiff further alleges that Slotylo knew that Dr. Jin had seen Dr. Dawn
MacFarland’s letter stating that she could not definitively diagnose Plaintiff with PG. Id. at ¶ 60.
Soon thereafter, Defendant allowed Plaintiff to see a specialist at the Mayo Clinic to determine
whether she had PG. Id. Plaintiff’s counsel allegedly sent an email to Heslep, Slotylo, and Dr.
Jin to provide the full report from the Mayo Clinic, which definitively determined that Plaintiff
did not have PG. Id. at ¶ 63. However, Plaintiff alleges, Defendant did not appropriately weigh
the evidence as required under West Virginia Code § 23-4-1g because Defendant ignored the Mayo
Clinic report and proceeded to terminate Plaintiff’s benefits. Id. at ¶ 64. Plaintiff additionally
alleges that when Slotylo issued the Claim Decision, she knew and fully appreciated that Dr. Jin
had not seen the Mayo Clinic report before issuing her diagnosis of PG, that the Mayo Clinic report

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was authentic and accurate, and that Slotylo was supposed to weigh all the evidence before making
a final decision. Id. at ¶ 66.
Again additional names were added to the Second Amended Complaint, but the additions
did not affect the underlying claims. See id. at ¶ 61 (adding Heslep to having notice of Plaintiff’s
representation).

Plaintiff also alleges a civil conspiracy to defraud Plaintiff’s worker’s

compensation in this count as well. See id. at ¶ 68.
II.

Legal Standard
In analyzing a party’s motion for judgment on the pleadings pursuant to Federal Rule 12(c),

the Fourth Circuit has indicated that the applicable standard is the same as a motion to dismiss
pursuant to Federal Rule 12(b)(6), noting that the “distinction is one without a difference.”
Burbach Broad Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002). To
overcome a motion for judgment on the pleadings, a complaint must be plausible. Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 546 (2007). This standard requires a plaintiff to set forth the “grounds”
for an “entitle[ment] to relief” that is more than mere “labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Id. at 555 (internal quotations and
citations omitted). A complaint must contain “sufficient factual matter, accepted as true, to state
a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal
quotations and citation omitted). Facial plausibility exists when a claim contains “factual content
that allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Id. (citation omitted).
Accepting the factual allegations in the complaint as true (even when doubtful), the
allegations “must be enough to raise a right to relief above the speculative level ….” Twombly,
550 U.S. at 555 (citations omitted). If the allegations in the complaint, assuming their truth, do

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“not raise a claim of entitlement to relief, this basic deficiency should … be exposed at the point
of minimum expenditure of time and money by the parties and the court.” Id. at 558 (internal
quotations and citations omitted). Finally, “[a]lthough for the purposes of a motion [for judgment
on the pleadings] we must take all of the factual allegations in the complaint as true, we are not
bound to accept as true a legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678
(internal quotations and citation omitted).
III.

Discussion
This Court has already made determinations of Plaintiff’s Count I and II under its previous

decision denying Defendant’s Motion to Dismiss. See Mem. Opinion & Order, ECF No. 191.
Although Defendant asserts that Plaintiff’s additional allegations in the Second Amended
Complaint further state a bad faith claim, the additional allegations still support Plaintiff’s
plausible claims under common law fraud. To make a valid claim under the Persinger doctrine,
“the employee must (1) plead his or her claim with particularity, specifically identifying the facts
and circumstances that constitute the fraudulent representation, and (2) prove by clear and
convincing evidence all essential elements of the claim.” Persinger, 474 S.E.2d at 899. The
essential requirements of a fraud claim are: “(1) that the act claimed to be fraudulent was the act
of the defendant or induced by him; (2) that it was material and false; that plaintiff relied upon it
and was justified under the circumstances in relying upon it; and (3) that he was damaged because
he relied upon it.” Horton v. Tyree, 139 S.E. 737, 738 (W. Va. 1927). In order to prove the
second element of reliance, “[a] plaintiff need not show that he or she personally relied upon the
fraudulent act to succeed in a Persinger cause of action. Instead, the material and false reliance
element in a Persinger action refers to the party to whom an employer conveyed false
information.” Cobb v. E.I. DuPont deNemours & Co., 549 S.E.2d 657, 661 (W. Va. 1999).

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This Court has already determined that Plaintiff alleges the necessary reliance by the claims
administrator to plausibly state a claim under the Persinger doctrine. Plaintiff is required to show
reliance by Slotylo, who acted as the decision maker, in order to allege plausible claims of fraud.
As explained in the Court’s previous Order, Slotylo allegedly acted within the authority of
Defendant as the claims administrator in making initial determinations of Plaintiff’s worker’s
compensation claim.

The fact that the additional allegations within the Second Amended

Complaint could support a bad faith claim is irrelevant because Plaintiff explicitly refutes a cause
of action under Chapters 23 and 33 of the West Virginia Code, and the additional allegations
continue to support a common law fraud claim under the Persinger doctrine. See Pl.’s Second
Am. Compl., ECF No. 230, at ¶ 2. The differences between the Second Amended Complaint and
the original Complaint only act to clarify which of Defendant’s employees were involved and
provide a framework for a possible claim against Heslep, the only additional outside party
mentioned. Plaintiff does mention Chapter 23 when alleging the failure to properly weigh
evidence as required in West Virginia Code § 23-4-1g, but the Court finds it plausible that this
allegation serves only to show that Defendant deliberately ignored the Mayo Clinic report in
accordance with its fraudulent scheme. At this stage, the Court only looks to whether Plaintiff’s
assertions can create a plausible claim under Persinger.
Defendant additionally argues in its second challenge that Plaintiff did not prove reliance
by an unknowing third party. Defendant asserts that the spirit of Persinger is “to punish an
employer who attempts to trick an administrative body.” Def.’s Mem. of Law in Supp. of Mot. for
J. on the Pleadings, ECF No. 242, at 11. When the West Virginia Supreme Court of Appeals
decided to create a common law fraud claim in Persinger, the court looked to other jurisdictions
that confronted a similar issue. Persinger, 474 S.E.2d at 893-96. The overwhelming rationale

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in permitting recovery was when “the injury giving rise to the cause of action is not suffered during
the course of employment” and when “the employer’s fraudulent misrepresentation of facts in an
attempt to deprive an injured employee of benefits rightfully due him from a previous work-related
injury is separate and distinct from any injury envisioned to be encompassed under workers’
compensation laws.” Id. at 896-97. There is no limitation in Persinger or its progeny that a
common law fraud claim requires the existence of an unknowing third party. The prior cases
based the Persinger claim on reliance by the Office of Judges, but as this Court already explained,
Slotylo is alleged as the decision maker who was provided with the fraudulent documents in this
case, and thus the Plaintiff must prove reliance by Slotylo. Mem. Opinion & Order, ECF No.
191, at 9-10. Defendant’s reliance on the lack of an unknowing third party is a distinguishing fact
without a difference, at least at this stage for judgment on the pleadings. Plaintiff has sufficiently
alleged facts that rise “above the speculative level” in order to state a plausible claim. Twombly,
550 U.S. at 555 (citations omitted). Without definitive guidance that an unknowing party is
absolutely necessary to maintain a Persinger claim, Count I and Count II of the Second Amended
Complaint are sufficient to “state a claim to relief that is plausible on its face.” Id. at 570.
Defendant lastly argues that Plaintiff’s claims are barred by West Virginia Code § 23-2C21, stating that “[n]o civil action may be brought or maintained by an employee against a private
carrier or a third-party administrator … who violates any provision of this chapter or chapter
thirty-three of this code.” W. VA. CODE § 23-2C-21 (2009) (emphasis added). As Defendant
recognizes, the “statute applies only to violations of Chapters 23 and 33 of the West Virginia
Code.” Def.’s Mem. of Law in Supp. of Mot. for J. on the Pleadings, ECF No. 242, at 13. The
Court has already determined that Plaintiff makes a plausible claim for common law fraud under
Persinger, which falls outside the statutory violations and thus outside the scope of the statute’s

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applicability. Defendant’s reliance on Wetzel v. Employers Service Corporation of West Virginia,
moreover, is misplaced because that plaintiff did not assert a common law fraud claim against the
defendant. 656 S.E.2d 55 (W. Va. 2007). The court’s explanation of the statute’s expanse in
that case, therefore, does not cover the common law fraud claim under Persinger. In fact, the
court stated that Persinger was inapplicable to that case and did not mention that the statute would
preclude such cause of action. Id. at 62. Therefore, the statute does not bar Plaintiff’s claims for
common law fraud against the Defendant and Defendant MES Solutions.5
IV.

Conclusion
Accordingly, Plaintiff’s Second Amended Complaint maintains a plausible claim of relief

against Defendants for common law fraud under the Persinger doctrine. Therefore, Defendant’s
Motion for Judgment on the Pleadings must be DENIED.
The Court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented parties.

ENTER:

5

October 24, 2016

After the 2005 statute became effective, the West Virginia Supreme Court of Appeals
still applied the Persinger doctrine, signifying that the statute does not bar the common law fraud
claim. See Bowens v. Allied Warehousing Servs. Inc., 729 S.E.2d 845, 852 (W. Va. 2012).
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